We were on vacation last week at Caswell Beach, NC, where we’ve gone with my family for many, many years. Here’s a view from one of the cottages we rented:
That’s the Oak Island lighthouse, the brightest lighthouse on the East Coast. Lighthouses are interesting. They are the textbook example of a public good. Public goods are things that exhibit 2 characteristics:
- non-rivalness of consumption (also known as jointness of supply). This means that one person’s consumption of the good doesn’t leave any less for other people to consume.
- impossibility of exclusion. This means that no one can be kept from consuming the good, even if they didn’t contribute to its provision.
Given these conditions, provision of a public good is a Prisoner’s Dilemma: even though everyone would prefer that the good be provided, no one has the individual incentive to contribute to its provision, so the good is undersupplied, or not supplied at all. (Demonstration of this is left as an exercise 🙂 )
Put another way, free markets will not adequately provide public goods and most of the time, that means that government must step in and provide them. This is something that even that champion of the invisible hand, Adam Smith, recognized.
The problem arises when you note that there are no pure public goods–it’s an ideal type.* So once you let that camel’s nose under the tent, we’re back at one of the seminal political debates–the appropriate role for government. I’m sure we’ll explore many facets of that over time.
It’s funny that when we were in NC, people were talking about the possibility that the new bypass around Raleigh might be a toll road. Roads are a great example of a quasi-public good; they sort of have non-rivalness of consumption, although they are subject to crowding, and they clearly are excludable–tolls keep out people who don’t pay (although in fact, it’s almost impossible to charge enough to pay for both initial construction and upkeep.) There are lots of examples from history that prove that allowing the private market to provide roads leads to way too few. And government provision of roads has been used (by “Kingfish” Huey Long, for example**) as a symbol of the government’s committment to the common man (as they allow farmers better opportunities to get their goods to market.) North Carolina prided itself on being the “good road state” when I was young, due to a massive effort to upgrade the secondary road network in the ’50s and ’60s. Nowadays, tolls are used as much for controlling traffic as for revenue generation. Even small tolls will deter enough people to affect traffic flow, apparently.
There are several other interesting (to me, at least) topics to tease out here, but perhaps another day.
*Oddly, lighthouses seem to me to come pretty darn close to the ideal type. But lighthouses have been provided by non-governmental actors in the past (ship-owner associations, for example). But I suspect they are still way underprovided in that situation.
**Commerical: He’s the model for the fictional Willy Stark in All the King’s Men, one of the great political novels of all time, IMO. It’s been made into a movie twice and we’ll almost certainly watch one version or the other in my Politics and the Movies course at Hilbert this coming semester. Sign up now!